The Pound Australian Dollar (GBP/AUD) exchange rate dropped on Thursday as Prime Minister Liz Truss resigns after just 45 days.

At time of writing the GBP/AUD exchange rate is around $1.7795, a 0.3% drop from this morning’s opening levels.

The Pound (GBP) softened on Thursday despite the initial uptick in the wake of Liz Truss resigning as prime minister, lasting only 45 days in office.

Becoming the shortest-serving prime minister in history, Truss’ calamitous reign saw the Pound plummet to record lows, markets in turmoil and confidence entirely sapped. After sacking her chancellor Kwasi Kwarteng and forcing Suella Braverman to resign as home secretary, Truss leaves a tattered and disjointed Tory party.

Markets have been in disarray since the disastrous mini-budget was announced with unfunded fiscal plans. Confidence in both the UK’s economy and government has seen investors deterred and the return to political uncertainty over who is next from the Conservative party conveyor belt to lead the country. Uncertainty surrounding fiscal policies could see Sterling slide again.

Rumours of Boris Johnson to make a return have started to pick up steam. However, Neil Wilson of Market.com, has warned that the Conservatives will find it difficult to stay in power, bringing further chaos to the market uncertainty. Wilson said:

Meanwhile, the Australian Dollar (AUD) enjoyed moderate tailwinds on Thursday in the wake of positive labour market data.

The unemployment rate remained at 3.5% for the month of September, unchanged from the previous month and came in line with market expectations. The number of people employed rose to a new record high of 13.6million, but the increase fell far below forecasts at 900, versus an expected 25,000 rise. The data comes in line with Reserve Bank of Australia (RBA) expectations of a loosening labour market and slowing interest rate hikes. The dovish stance could deter investors further.

Meanwhile, positive news out of China may be supporting the ‘Aussie’. Reports are circulating that Beijing may be moving away from the strict zero-Covid policy that has seen numerous slowdowns in the world’s second largest economy. Officials in China are debating whether to reduce mandatory quarantine time for those entering the country.

Looking ahead, and a lack of major data for the Pound Euro exchange rate could see the pairing exposed to market sentiment. With Truss resigning and question marks over the next prime minister, the fifth in three years, Sterling could remain under pressure.

Meanwhile, a lack of major data for the Australian Dollar means the ‘Aussie’ will be fluctuating on global market sentiment. Any further news from China and Ukraine are likely to weigh on the risk-sensitive ‘Aussie’.

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